The Cycle Division of Ayala Company has the following per unit data related to its most recent cycle called Roadbuster.

Presently, the Cycle Division buys its body frames from an outside supplier. However Ayala has another division, FrameBody, that makes body frames for other cycle companies. The Cycle Division believes that Framellody's product is suitable for its new Roadbuster cycle. Presently, FrameBody sells its frames for $350 per frame. The variable cost for FrameSody is $261. The Cycle Division is willing to pay $289 to
purchase the frames from FrameBody.
Required:
Assume that FrameBody has excess capacity and is able to meet all of the Cycle Division's needs. If the Cycle Division buys 1,090 frames from FrameBody, determine the following: (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
(1) Effect on the income of the Cycle Division
(2) Effect on the Income of FrameBody
(3) Effect on the Income of Ayala

Transcribed Image Text:

Selling price $2,260 Variable cost of goods sold Body frame $305 Other variable costs 890 (1,195) Contribution margin $1,065